If Ram Nation can give up one unit of future consumption and as a result increase its current consumption by 0.96 units, what must be its real rate of interest.need answer
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If Ram Nation can give up one unit of future consumption and as a result increase its current consumption by 0.96 units, what must be its real rate of interest.need answer
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- This question will compare two different arbitrage situations. Recall that arbitrage should equalize rates of return. We want to explore what this implies about equalizing prices. In the first situation, two assets, A and B, will each make a single guaranteed payment of $100 in 1 year. But asset A has a current price of $80 while asset B has a current price of $90.a. Which asset has the higher expected rate of return at current prices? Given their rates of return, which asset should investors be buying and which asset should they be selling?b. Assume that arbitrage continues until A and B have the same expected rate of return. When arbitrage ceases, will A and B have the same price?Next, consider another pair of assets, C and D. Asset C will make a single payment of $150 in one year while D will make a single payment of $200 in one year. Assume that the current price of C is $120 and that the current price of D is $180.c. Which asset has the higher expected rate of return at current…Why is the optimal interest coverage ratio equal to 1 if taxes are the only imperfection?Why is a dollar today worth less than a dollar sometime in the future?
- the rate of return is the break-even interest rate i at which the annual equivalent cost of a project is zero. true or falseHow long will it take to double your investment if the interest rate is r=0.06 (r=6%)?You are considering an investment manufacturing cocoa powder. This investment needs $185,000 today and expects to repay you $200,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your discount rate is 11%. What does the IRR rule say about whether you should invest? a. The IRR is 7.5%. The IRR rule says that you should not invest. b. The IRR is 8.11%. The IRR rule says that you should not invest. c. The IRR is 1.2%. The IRR rule says that you should not invest. d. The IRR is 16.8%. The IRR rule says that you should invest.
- b. If instead GBC were to offer investors an effective annual return of 3.3159%, what price should they charge for this product? Give your answer in dollars, to the nearest cent.Which investment criteria answers the question: "How quickly do we recover our investment, in nominal dollars?" A) net present value B) internal rate of return C) profitability index D) payback periodWhich factor sets an upper limit on how much can be paid for savings?
- Please answer the question attached in the picture below.If intrest rates change from i to i' after the inital period. What is the initial value of the consol and what is the yield from selling it after one period?You are considering an investment in a clothes distributer. The company needs $105,000 today and expects to repay you $120,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 17%. What does the IRR rule say about whether you should invest? What is the IRR of this investment oppurtunity? The IRR of this investment opppurtunity is ____%